RONALD LEE LYKINS APPEALS v. MARTHA ANN LYKINS
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RENDERED:
NOVEMBER 17, 2000; 2:00 p.m.
TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
NO.
1999-CA-000094-MR
and
1999-CA-000927-MR
RONALD LEE LYKINS
v.
APPELLANT
APPEALS FROM FAYETTE CIRCUIT COURT
HONORABLE REBECCA M. OVERSTREET, JUDGE
ACTION NO. 97-CI-00731
MARTHA ANN LYKINS
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
JOHNSON, SCHRODER AND TACKETT, JUDGES.
JOHNSON, JUDGE: These are the consolidated appeals of Ronald Lee
Lykins from an order of the Fayette Circuit Court entered on
December 11, 1998, and the final judgment entered on March 24,
1999, which dissolved his marriage to Martha Ann Lykins and
resolved the disputes arising from their marital relationship.
Ronald has raised three issues for our review, one of which
presents an issue of first impression, that is whether payments
received under the Voluntary Separation Incentive (VSI) program1
are subject to equitable division under KRS2 403.190.
After a
review of the record and the applicable legal authorities, we
discern no error in the trial court’s determination that the VSI
payments constitute marital property, nor any error with respect
to the other rulings challenged in this appeal.
Therefore, we
affirm.
The parties were married in 1982, and separated in
January 1997.
They sold the marital residence and divided the
proceeds of the sale, as well as their personal property, prior
to the final hearing before the trial court.
The parties’ child,
Leigha, was 13-years-old at the time of their separation.
and Martha each had a child from their prior marriages:
Ronald
Martha’s
child, Rachel, who was two-years-old at the time of the Lykins’
marriage, lived with the parties throughout her minority;
Ronald’s son, Aaron, lived with the parties for four years.
The
decree of dissolution approved of the parties’ division of
property; provided for the parties to share joint custody of
Leigha; provided that Ronald would provide support for Leigha
calculated by using his current income from nursing and not an
imputed income; and provided that Ronald would pay Martha the sum
of $300 per month for two years in rehabilitative maintenance, if
Martha enrolled in a Master’s level program to enhance her
undergraduate degree in psychology.
1
10 U.S.C. § 1175 (2000).
2
Kentucky Revised Statutes.
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Additional facts and rulings
of the trial court will be recited as they relate to the
arguments presented.
The primary issue in this appeal concerns the trial
court’s characterization of certain payments to which Ronald has
become entitled as a result of his voluntary separation from the
military in 1992.
When the parties married in 1982, Ronald was a
member of the United States Army and remained so until September
1992.
Ronald, who held various positions in the military,
including helicopter pilot and instructor, spent six and ½ years
in the military prior to his marriage to Martha, and had a total
tenure of 16 years in the military at the time of his voluntary
resignation.
There is no question that in 1991 the federal
government wanted to reduce the size of the military forces and
passed legislation to entice personnel, with between six and 20
years of active military service, to voluntarily resign rather
than “run the risk of being involuntarily separated due to
reductions in the size of the United States military”.3
Pursuant
to legislation creating the VSI program and the Special
Separation Benefit (SSB) program,4 eligible personnel can choose
to receive either an annuity “for the period equal to twice the
number of years of service,”5 in exchange for remaining in the
inactive reserve (VSI), or a lump-sum payment (SSB), for
remaining in the active reserves for three years.
3
Kelson v. Kelson, 675 So.2d 1370, 1372 (Fla. 1996).
4
10 U.S.C. § 1174a (2000).
5
Id. at § 1175(2)(A).
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When he separated from the military, Ronald opted for
the VSI plan which entitled him to receive $18,102.536 a year for
thirty-four (34) years, commencing in September 1992.
Both
parties enjoyed the VSI benefits until their marital separation
at which time Ronald insisted the payments were his separate
property.
Martha contended that the percentage of the payments
attributable to the years Ronald was in the military during the
marriage constituted marital property subject to division.
Ronald moved for a summary judgment on the issue of the nature of
the asset.
On December 12, 1998, the trial court entered the
first of the two orders from which Ronald has appealed and
concluded that the payments constituted marital property, subject
to Ronald’s non-marital component.7
In the final judgment,
Ronald was awarded a portion of the VSI payments representing his
pre-marital years of military service as his non-marital
property.
The remaining VSI payments were divided equally,
resulting in an award to Martha of 30.13% of the “after-tax” VSI
payments to be paid within five days after Ronald’s receipt of
the annual payment.
In his brief, Ronald contends that the trial court
erred in its determination that any of the VSI payments
constituted marital property.
He insists that the trial court
6
The amount of the benefit was calculated by the following
formula: 2.5% of his monthly basic pay, multiplied by 12, and
the result multiplied by the number of years of service. §
1175(e)(1). Ronald also receives some disability payments which
reduce the VSI dollar for dollar.
7
Ronald’s appeal from this order was consolidated with his
appeal from the final judgment of the Fayette Circuit Court.
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“ignored the statutory realities of VSI,” and “failed to justify
[its] ruling.”
Ronald criticizes the trial court for “ignor[ing]
th[e] reasoning from our neighboring state” articulated in
McClure v. McClure,8 and its comparison of VSI payments to
severance pay, an analogy he opines, which “apparently eluded the
trial court.”
Martha, not surprisingly, argues that the trial
court was not in error and that its decision “is firmly backed by
legislative history, eight other Courts and equity.”
The beginning point in our examination of the trial
court’s characterization of any asset is KRS 403.190(2), which
defines marital property as “all property acquired by either
spouse subsequent to the marriage,” except property acquired by
gift, bequest, devise or descent and other exceptions not
relevant to the matter sub judice.
In general, property is
“presumed to be marital,”9 and the trial court has “wide
discretion” in the division of marital assets.10
However, assets
obtained during the marriage which represent loss of postdissolution earnings do not constitute marital property subject
to division.11
Thus, the issue is whether the VSI payments are,
8
98 Ohio App.3d 27, 647 N.E.2d 832 (1994).
9
Reeves v. Reeves, Ky.App., 753 S.W.2d 301, 302 (1988).
10
Davis v. Davis, Ky., 777 S.W.2d 230, 233 (1989).
11
Mosley v. Mosley, Ky.App., 682 S.W.2d 462, 463 (1985)
(workers’ compensation payments “which accrue and are paid after
the dissolution of the marriage are not part of the marital
property any more than the worker’s future earnings would be”);
Weakley v. Weakley, Ky., 731 S.W.2d 243, 244 (1987) (personal
injury award for impaired ability to earn wages is non-marital
“[t]o the extent that the award can be prorated to the remaining
years of life expectancy following the dissolution”).
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as Ronald contends, in the nature of severance and intended to
compensate him for future lost earnings, or whether they are in
the nature of deferred compensation or pension benefits, earned
during the marriage and subject to division.
Ronald relies on McClure, supra, in support of his
argument that VSI payments are paid in lieu of future income.
McClure held:
Given the Congressional intent behind
the VSI program, VSI payments are more
closely analogous to severance benefits than
retirement benefits. . . . Like severance
payments, VSI benefits attempt to compensate
a separated service member for future lost
wages. . . . The mere fact that the amount
of the payments is determined according to
the number of years of service does not
necessarily render these payments
compensation for past services. Rather,
severance pay is frequently calculated
according to the number of years of
employment. Although severance pay received
during the marriage is marital property to
the same extent that wages paid during the
marriage are marital property, severance
payments intended to compensate for wages
lost after the divorce cannot be
characterized as marital property [citations
omitted].12
As Martha points out, the view of the Ohio intermediate
appellate court has gathered little acceptance.
Indeed, most
other jurisdictions that have examined the issue of the nature of
either VSI payments or SSB payments have determined that they are
“the functional equivalent of . . . retired pay,”13 or “payment
12
McClure at 841.
13
Kelson, supra at 1372.
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in lieu of retirement benefits,”14 and therefore constitute
either marital, or community, property depending on the
jurisdiction.15
The
analogy in Blair v. Blair,16 likening incentive payments to early
retirement, is typical of the rationale reached by the majority
of the cases our research has revealed:
Like retirement, [husband’s] eligibility
for the SSB program was based on the number
of years he served in active duty. . . . As
with retirement pay, [his] separation pay was
calculated according to the number of years
he was in active service. . . . [He] could
have remained on active duty for five more
years and received retirement pay. Instead,
he chose voluntary separation from the
military and received his compensation at an
earlier date. For the reasons we have
stated, we characterize separation pay
received under the Special Separation
14
In re Crawford, 180 Ariz. 324, 884 P.2d 210, 212
(Ariz.App. 1994).
15
See Fisher v. Fisher, 319 S.C. 500, 504, 462 S.E.2d 303,
305 (1995) (“husband’s early discharge under the VSI program is
analogous to an early retirement . . . [because] any rights the
husband now possesses to receive early discharge incentive
payments are due to the time he spent in the military and accrued
during his marriage to the wife”); Marsh v. Marsh, 973 P.2d 988,
991 (Ut.App. 1999) (SSB determined to be “analogous to retirement
pay”); In re Heupel, 936 P.2d 561, 569 (Colo. 1997) (VSI and SSB
“are meant to compensate for the loss of the right to receive
retired pay in the future whether characterized as a buyout, an
advance, or deferred compensation for services already
rendered”); In re Babauta, 66 Cal.App.4th 784, 78 Cal. Rptr. 2d
281 (1998) (VSI and SSB benefits determined to be community
property); Marsh v. Wallace, 924 S.W.2d 423, 426 (Tex.App. 1996)
(SSB “is not compensation for lost future wages but instead
compensation for lost retirement pay earned in the past that
[husband] voluntarily gave up receiving in the future”); Pavatt
v. Pavatt, 920 P.2d 1074, 1076 (Okla.Civ.App. 1996) (“SSB payment
is to be treated as a retirement plan asset”); Kulscar v.
Kulscar, 896 P.2d 1206 (Okla.App. 1995) (SSB payments are in lieu
of retirement benefits); In re McElroy, 905 P.2d 1016 (Colo.App.
1995) (SSB’s are marital property).
16
271 Mont. 196, 894 P.2d 958, 961-62 (1995).
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Benefits program . . . as an election for
early retirement [citations omitted].
We are persuaded by the reasoning in these cases which
have held, contrary to McClure, that the benefits for voluntary
separation from the military are more closely akin to early
retirement benefits than severance pay.
Clearly, the manner in
which the payments are calculated has the indicia of pension
benefits, that is, a formula based on years of service and the
level of pay at the time of separation from active duty.
Further, as recognized in several jurisdictions, the payments are
recouped by the government if the service member later becomes
entitled to retirement benefits.17
That the separating officer must “repay”
the benefits received under the SSB and VSI
programs in order to receive retired pay (if
he or she later becomes eligible to receive
it), is strong evidence that SSB and VSI
payments are a form of retired pay in the
first instance. Specifically, if these
benefits were intended to compensate for lost
future income, they would not be subject to
recoupment from retired pay.
. . .
Thus the payments received pursuant to
the SSB and VSI programs cannot be likened to
severance pay or, more specifically,
compensation for lost future income. This
makes practical sense. Because the benefits
are received at the election of the
separating member, the member accepts the
risks associated with the transition into
civilian life and may have already planned
ahead for those risks by securing postdischarge employment in advance.18
17
See 10 U.S.C. § 1175(e)(3)(2000).
18
Heupel, supra at 571. See also Wallace, supra at 426
(recipient who later becomes eligible for retirement “has in
(continued...)
-8-
While McClure predicates its holding on what it
perceives to be Congress’s intent to provide severance payments
for early separation from the military, other jurisdictions have
developed a different perspective on the issue of legislative
intent.
For example, when presented with a “post enactment
discussion draft” purported to provide authority for
Congressional intent, the Court in Crawford explained:
We find more relevant a 1990 House Report
predating the enactment of the SSB program
which in relation to the congressionally
mandated “force drawdown” recommended “a
comprehensive package of transition benefits
to assist separating personnel and their
families,” H.R.Rep. No. 665, 101st Cong., 2d
Sess. (1990), . . . suggesting that equitable
division of SSB benefits is not inconsistent
with congressional intent.19
In Heupel, the Court reasoned that to allow the service-member
spouse to unilaterally decide to participate in SSB and VSI
programs, and thereby deprive their spouse of their future share
of retirement benefits, would “undermine[] Congress’s intent in
legislating the USFSPA20 and the SSB/VSI programs.”21
18
(...continued)
effect received a prepayment on retirement pay because the
retirement benefits are reduced by the amount of the SSB
payment”) and, McElroy, supra at 1020 (the “pay-back provision
also supports the trial court’s determination that the SSB
benefit is in lieu of retirement pay”).
19
Crawford, supra at 212. See also Wallace, supra at 426
(SSB payments “are designed to ‘assist separating personnel and
their families’” and in that respect differ from payments made
upon involuntary severance from the military)(emphasis in
original).
20
Uniformed Services Former Spouses’ Protection Act,
U.S.C. § 1408 (1994).
21
Heupel, supra at 569.
-9-
10
Ronald attempts to distinguish the cases relied upon by
Martha from McClure, by arguing that her authorities involved
marital dissolutions which occurred before the service members’
voluntary separation from the military and that the participants
in the VSI or SSB programs were motivated by a desire to defeat
the terms of an existing decree awarding retirement benefits to
their former spouses.
Ronald insists that his reasons for taking
an early-out from the military did not include depriving Martha
of her share of his retirement benefits.
He correctly points out
that the trial court did not find him to have such a motive.
Nevertheless, we believe this distinction to be totally
irrelevant to the issue of the nature of the asset, an issue
which is determined by reference to the intent of Congress in
establishing the programs, and to our statutory law and case law
which define the parameters of marital property.
The asset at
issue is intended to be, and is in the nature of, either
severance pay or early retirement.
The proper characterization
of the asset is not dependent upon the service member’s motives,
good or bad, for opting to take advantage of the programs.
While
several cases have, as discussed, held that allowing service
members to defeat their former spouse’s expectations with respect
to retirement benefits would undercut the intent of Congress, the
lack of such improper motivation does not otherwise transform the
nature of the asset into Ronald’s separate property.
For the
foregoing reason, we hold that the trial court did not err in
characterizing the VSI payments as marital property.
-10-
Next, Ronald argues that the trial court erred in
failing to allocate half of the marital debt to Martha.
Specifically, he claims error in the trial court’s refusal to
require Martha to be responsible for repaying any portion of the
$18,000 loan obtained from his brother, sums Ronald testified
that he borrowed to maintain the marital residence.
In dividing the marital debts, the trial court assigned
to Martha the entire debt owed to Bank of Boston, one-half the
credit card debts owed to Citibank, Suntrust and Omni Credit Card
Center as of December 1996; and all the credit card debt incurred
after the parties’ separation.
Ronald was assigned the remaining
one-half of the debts owed on the credit cards up to December
1996, and all the debt owed to his brother.
In all, Martha was
assigned marital debt of nearly $15,000, and Ronald was
determined to be responsible for debt of about $25,000.
As with
the division of marital assets, the trial court has broad
discretion in its allocation of marital debt.
We are not
persuaded that there was any abuse of that discretion in the case
sub judice.
As to the final issue, Ronald alleges that the trial
court erred in denying his request to a share of Martha’s claim
against Rachel’s father for child support arrearages.
Ronald
argues that since Rachel lived with the parties for 16 years of
her minority, years during which they did not receive any support
from Rachel’s father, he is entitled to share in any of the
-11-
arrearages Martha may collect in an URESA22 action she has filed
in West Virginia.
He further reasons that since an obligation to
pay child support vests when it is due, the arrearages incurred
during the marriage are marital property subject to division.
Ronald has not cited this Court with any authority to support his
theory that the claim for arrearages constitutes marital
property.
However, it is apparent that Martha’s right to child
support was acquired prior to her marriage to Ronald.
Further,
the support was intended to benefit Rachel, and not the parties
to the marriage.
As a general rule, a step-parent owes no duty of
support to a step-child.
Instead, children of divorce are
required to be supported by their parents.23
The record
indicates that Ronald, like many step-parents, voluntarily
undertook to provide support to Rachel while she resided in his
household.
While Ronald’s desire to be reimbursed for his
contribution to Rachel’s support may be a reasonable one, we are
unable to conclude that the trial court erred as a matter of law,
or abused its discretion, in refusing to grant him any portion of
the proceeds of the URESA action, if any proceeds should ever
materialize.
Accordingly, the order and judgment of the Fayette
Circuit Court are affirmed.
ALL CONCUR.
22
Uniform Reciprocal Enforcement of Support Act, KRS Chapter
407 et seq.
23
KRS 403.210.
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BRIEF AND ORAL ARGUMENT FOR
APPELLANT:
BRIEF AND ORAL ARGUMENT FOR
APPELLEE:
W. Stokes Harris, Jr.
Lexington, KY
Michael Davidson
Lexington, KY
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